We all face financial emergencies; that’s just part of life. But how you handle them will determine your success with money and building wealth. One of the best ways to combat financial setbacks is to create a financial emergency kit. Here’s how to assemble one so you’ll be prepared when disaster strikes or the economy fails you (again).
What Should a Financial Emergency Kit Include?
One of the difficulties in assembling a financial emergency survival kit is that it’s hard to know exactly what financial emergencies might pop up that would cause you to need it.
The possibilities are virtually endless, but for the sake of putting together some sort of a plan, here is a short list of some emergencies and how to prepare for them.
- A sudden illness or accidental death
- A sudden income disruption (job loss, business failure, etc.)
- A major environmental event, such as a huge earthquake, hurricane or tsunami
- Collapse/major disruption of the financial markets
- A biological/chemical or limited nuclear war that reaches U.S. soil
- The collapse of the economy
Though different emergencies will require different survival techniques, let’s try to assemble a list of financial emergency survival kit “must-haves” that are likely to come in handy in a variety of emergency situations.
1. Create a 30-Day Cash Supply on Hand
When thinking about almost any type of financial emergency, having cash on hand is probably the most basic preparation you can make. It could come in handy in the event one or more of your financial accounts is cleaned out or frozen as a result of fraudulent activity or even seizure.
And it would certainly be important if either the electrical grid or the Internet were compromised and you are unable to get access to the funds held in your traditional accounts.
Having enough cash to cover at least 30 days of living expenses should be all you need for the most severe financial emergencies. You should keep it at home, stashed in a safe place. That way it will be available when you need it.
Just make sure you store it in a container unlikely to be destroyed by fire, floods or earthquakes.
2. Save a 6-Month Cash Reserve at a Local Bank
In a day and time when the stock market is providing double digit returns annually and money is so available from credit, a lot of people have abandoned the idea of having a traditional emergency reserve fund. But having one can be the difference between survival and living on the street.
A reserve equal to at least six months of living expenses should get you through the worst of most emergencies. It’s best to have it available at a local bank, in case you need to access it quickly. Distance could be a factor in certain types of emergencies.
3. Invest in Some Silver Coins (Not Gold)
You should make preparations to have some sort of money equivalent in the event the emergency involves the U.S. currency. This can include a dollar collapse, an electrical grid failure, or some sort of disruption of the electronic funds transfer process. Though nothing is guaranteed, precious metals have withstood the test of time as a monetary commodity.
Pre-1965 U.S. silver coins are a good choice. Sometimes referred to as junk silver because the coins generally have no numismatic value, they are nonetheless easily recognizable and have trusted silver content.
Why silver and not gold? What you’re really interested in here is barter. Silver’s lower value makes it more suitable as a barter asset than gold, which is more about protection of asset values. Silver will enable you to trade with regular folks more easily in the event paper money no longer fills that role.
4. Keep a Written Record of Your Accounts
Some sort of ugly computer event — maybe a global virus — could conceivably wipe out financial records, which could include records of assets you have on deposit with various financial institutions. Having complete written records of your finances, accounts, credit cards and other monies will help prove your claim on those assets once the dust begins to settle.
This is also important to keep in the event of your sudden death and your family needs to access the accounts. They will need to know where the bank accounts are located, the account numbers and other pertinent information. This includes the title to your car, home and other assets.
5. Stay Ahead of Your Monthly Bill Payments
One of the best ways to be prepared for an emergency is to pay your bills in advance. This will be especially important if the emergency is a sudden income disruption. Most people tend to pay their bills in arrears — which is fine while you have a regular cash flow. But if that cash flow were to come to a sudden stop, the due dates would become an immediate burden.
Paying your bills ahead of schedule is the rough equivalent of having cash reserves. If your bills are paid 30 days in advance, it will buy you some breathing room before you’ll need to begin tapping actual cash reserves.
6. Stock Up on Food, Medicines and Basic Supplies
Certain types of emergencies could limit physical mobility. Severe weather conditions or an earthquake could easily do that. In that situation, cash won’t help much, but having a supply of the basics will.
Some people think this is a form of preparing for the Apocalypse, and if it’s taken too far that’s what it can become. But storing enough basic supplies to cover your needs for a few weeks is just good common sense. This is even more important if you have dependents, such as children or elderly family members, to care for.
Stock up on a few weeks’ worth of nonperishable foods (rice, pasta, canned goods, dry goods), soaps, toiletries and laundry detergent, common medications, batteries, light bulbs and any products you need and use on a regular basis. Once again, these can be cash equivalents in conditions where useful goods and supplies are worth more than money.
Readers: Do you have a financial emergency kit? What do you have in it?